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Oak Brook, IL-McDonald's Corp. reported its
third-quarter profits rose 1 percent, meeting expectations, as it
offset the impact of weaker foreign currency with strong U.S. sales
and a more favorable tax rate.

The global maker of hamburgers, french fries and other fast-food
items said its net income rose to $548.5 million, or 41 cents a
share, from $540.9 million, or 39 cents, in the year-earlier
period.

McDonald's, which warned last month that a weakened euro
could shave its full-year earnings by an additional 2 cents per
share, saw its European operating income fall to $313.5 million
from $324.8 million. Wall Street now expects the company to earn
$1.50 per share in the year, down from an earlier view of
$1.51.

Sales in the European region, McDonald's second-largest,
were down slightly to $2.45 billion, from $2.46 billion.

"They took a big currency hit in Europe," said Damon
Brundage, an analyst with Raymond James. "I think it's
very much in line with the reduced expectations. The bad news is
already in the stock."

"Obviously, the strength of the dollar has cost us
significantly in terms of earnings per share," chairman and
chief executive Jack Greenberg said in an interview. "This is
not an economic cost to our shareholders. This is an accounting
convention."

The company saw a 2-cent-per-share currency impact in the
quarter, and reiterated earlier forecasts about the potential for a
full-year hit of about 7 cents, CFO Mike Conley told analysts
during a conference call.

McDonald's U.S. market posted strong gains as sales rose 3.7
percent to $5.1 billion from $4.9 billion last year, and operating
income increased to $426.2 million from $389.6 million. Greenberg
said the company is beginning to see positive effects from its new
U.S. Made For You custom food preparation system, a new "We
love to see you smile!" ad campaign and store
improvements.

The company, which has widened its reach beyond the
McDonald's brand with the purchase of the Boston Market and
smaller-scale Donatos Pizza and Chipotle Mexican Grill chains, may
be readying for some large U.S. initiatives, Greenberg hinted on
the call.

"I think you'll see a business in the U.S. that will
surprise you because of the kinds of strategic efforts
underway," he said. -Reuters